See Also >>> 401K Plan Audits
Making mistakes is a part of life that everyone has to deal with. It is said to err is human. Now what sets people apart from each other is how they overcome them, learn and make changes. Managing a retirement plan is actually quite similar. The sheer number of rules and regulations means there are times when legitimate oversights and errors may happen. In fact, the larger the plan there is a greater opportunity for error. The good news is that the IRS has a process in place for certain errors to be quickly and easily addressed through the self-correction program (SCP). This program provides an easy and penalty free method to correct insignificant errors. To help clients, prospects and others understand SCP and eligible errors; Wilson Lewis has provided a summary of key information below.
Eligibility
In order to resolve a plan management error using the self-correction program, the error in question must be considered insignificant. Examples of insignificant errors include; failure to follow the terms of the plan, excluding eligible participants, not making proper contributions as required by plan terms and loan compliance failures. The IRS provides guidance to help plan sponsors identify whether a violation is insignificant, including:
It’s important to note that no single criterion would exclude an error from the self-correction program. The IRS points out in their guidance that a failure is not necessarily significant because it occurred in more than one year. Unfortunately, the IRS does not offer guidance beyond general statements about what errors can be resolved through SCP, so it’s important to carefully assess the issue to ensure it qualifies for the SCP. There are several resources on the IRS website that can help guide the process.
Steps to Correction
The IRS recommends that a plan sponsor using the following steps when making a correction through self-correction program:
Contact Us
Maintaining compliance with IRS and other regulations is imperative. Remember the SCP can only be used to address certain plan errors. For this reason it’s essential to consult with a professional before approaching the IRS. If you have questions about the SCP or on your annual retirement plan audit, Wilson Lewis wants to help. For additional information please contact us at 770-476-1004, or click here to contact us. We look forward to speaking with you soon.
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